- (1.) In these proceedings - two of them Writ Petitions under Article 32 of the Constitution and two others which are appeals from orders passed by the Delhi High Court under Article - 226 - relief is claimed in respect of action taken under Section 132 of the Income-tax Act, 1961 (hereinafter called the Act) by way of search and seizure of certain premises on the ground that the authorisation for the search as also the search and seizure were illegal. The challenge was based on constitutional and non-constitutional grounds. For the appreciation of the constitutional grounds it is not necessary to give here the detailed facts of the four cases. It is sufficient to state that in all theses cases articles consisting of account books and documents and in the Writ Petitions, also cash, jewellery and other valuables, were seized by the Income-tax authorities purporting to act under the authorisation for search and seizure issued under Section 132 read of the Act. Broadly speaking the constitutional challenge is directed against sub-sections (1) and (5) of Section 132 of the Act and incidentally also against rule 112A on the ground that these provisions are violative of the fundamental rights guaranteed by Articles 14, 19 (1) (f) (g) and 31 of the Constitution. The non-constitutional grounds challenge are based upon allegations to the effect that the search and seizure were not in accordance with Section 132 with Rule 112. This challenge will have to be considered in the background of the facts of the individual cases.
(2.) Chapter XIII of the Act deals with Income-tax authorities, their powers and jurisdictions. The hierarchy of authorities as given in Section 116 shows that the class of authorities designated as Director of Inspection is shown below the Central Board of Direct Taxes and above the class of authorities known as Commissioner of Income-tax. The other authorities mentioned are Assistant Commissioners of Income-tax, Income-tax Officers, and Inspectors of Income-tax, Section 117 shows by whom these various authorities are to be appointed. Section 118 deals with subordination and control. Section 119 deals with the powers of the higher authorities to give instructions and directions to subordinate authorities. Under S. 120 Directors of Inspection have to perform such functions of any other Income-tax authority as may be assigned to them by the Board. The Board, it is clear, might assign to the Director Inspection the functions of any other under the Act.
(3.) We may then turn to part 'C' of this Chapter which deals with the powers. Section 131 says that the authorities from the Commissioner down to the Income-tax Officer shall have the same powers as are vested in a court under the Code of Civil Procedure in respect of several matters including the enforcing of attendance of any person or compelling the production of books of account and other documents. Section 132 provides for search and seizure. It appears that under S. 37 (2) of the Income-tax Act, 1922 a limited power of search and seizure had been first given to the Income-tax authorities in 1956. The present Income-tax Act initially gave that power under Section 132 on the same lines as the old Section 37 (2). But there were further amendments in Section 132 in 1964 and 1965. Under the amendment of 1965, two sections namely Ss. 132 and 132A were substituted for the original S. 132. We are concerned with these sections and it will be therefore, necessary in the first instance to reproduce the same: "132. (1) Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of S. 37 of the Indian Income-tax Act, 1922 (XI of 1922) or under sub-section (1) of Section 131 of this Act, or a notice under sub-section (4) of Section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of Section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceedings under the Indian Income-tax Act, 1922 (XI of 1922) or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, sate, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: (iv) place marks of identification on any books of account or others documents or make or cause to be made extracts or copies therefrom: (v) make a note on an inventory of any such money, bullion, jewellery or other valuable article or thing. (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other document, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section. (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceedings under the Indian Income-tax Act, 1922 (XI of 1922), or under this Act. (5) Where any money, bullion, jewellery or other article or thing (hereinafter in this section and Section 132A referred to as the assets) is seized under sub-section (1) the Income-tax Officer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety days of the seizure, make an order, with the previous approval of the Commissioner; (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgement on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (XI of 1922) or this Act; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in cl. (a) of sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized. Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized; Provided further that where a person had paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii) and (iii)or any part thereof, the Income-tax Officer may, with the previous approval of the Commissioner, release the assets or such part thereof as he may deem fit in the circumstance of the case. (6) The assets retained under sub-section (5) may be dealt with in accordance with the provisions of Section 132A. (7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or an behalf of any other person, the Income-tax Officer may proceed under sub-section (5) against such other person and all the provisions of this section shall apply accordingly. (8) The books of account or other documents seized under sub-sec. (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner for such retention is obtained: Provided that the Commissioner shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (XI of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (9) The person from whose custody any books of account or other documents are seized under sub-section (1) may make copied thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in his behalf, at such place and time as the authorised officer may appoint in this behalf. (10) If a person legally entitled to the books of account or other documents seized under sub-section (1) objects for any reason to the approval given by the Commissioner under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents. (11) If any person objects for any reason to an order made under sub-section (5), he may, within thirty days of the date of such order, make an application to such authority, as may be notified in this behalf by the Central Government in the Official Gazette (hereinafter in this section referred to as the notified authority), stating therein the reasons for such objection and requesting for appropriate relief in the matter. (12) On receipt of the application under sub-section (10) the Board, or on receipt of the application under sub-section (11) the notified authority, may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. (13) The provisions of the Code of Criminal Procedure, 1898 (V of 1898), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1). (14) The Board may make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer. (i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.- In computing the period of ninety days for the purposes of sub-section (5), any period during which any proceeding under this sections is stayed by an order or injunction of any court shall be excluded. Explanation 2.- In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (XI of 1922) or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commended after such date in respect of any year. Sec. 132A. (1) The assets retained under sub-section (5) of Section 132 may be dealt with in the following manner, namely: (i) The amount of the existing liability referred to in clause (iii) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in clause (I) of that sub-section relates, and in respect of which he is in default or is deemed to be in default may be recovered out of such assets. (ii) If the assets consist solely of money, or partly of money and partly of other assets, the Income-tax Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied. (iii) The assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Income-tax Officer under authorisation from the Commissioner under sub-section (5) of Section 226 and the Income-tax Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-sec. (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4) (a) The Central Government shall pay simple interest at the rate of nine per cent per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in cl. (iii) of sub-section (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) Such interest shall run from the date immediately following the expire of the period of six months from the date of the order under sub-section (5) of Section 132 to the date of the regular assessment or reassessment referred to in clause (i) of sub-section (1), or, as the case may be, to the date of last of such assessments or reassessments.;